McKesson Plans Sale-Leaseback of San Francisco HQ

The 38-story tower at One Post St. might fetch as much as $275 million.
One Post St., San Francisco

One Post St., San Francisco

San FranciscoJLL is marketing One Post St. in San Francisco, the corporate headquarters of healthcare giant McKesson Corp., in what is expected to be a major sale-leaseback deal.

Located at the corner of Post and Market streets adjacent to the Montgomery BART station in the city’s Financial District, the 38-story office building was completed in 1969. McKesson had a 50 percent stake in the property when it was built and acquired the remaining 50 percent in 2012. It paid $90 million for the stake in 2012, according to data provided by Yardi Matrix.

The San Francisco Business Times was the first to report the company was putting its headquarters up for sale and planning to lease back part of the building. Representatives for both McKesson and JLL confirmed the plan to Commercial Property Executive.

“One Post offers investors the extremely rare opportunity to acquire the headquarters of a Fortune 5 company, while embarking on a transformative repositioning of a landmark San Francisco office tower,” Rob Hielscher, managing director in JLL’s Capital Markets Group in San Francisco, told CPE.

McKesson, currently ranked 5th on the Fortune 500, is a healthcare services and information technology company and the largest pharmaceutical distributor in North America. By next year, the company expects to consolidate operations around San Francisco and have approximately 1,200 employees at One Post St. A company spokesperson said there are no other plans to lease additional space in the city and confirmed that one of the locations where employees would be moved from is 123 Mission St.

The 488,000-square-foot building has rentable square footage of roughly 420,000 square feet. With rents more than $600 per square foot, the sale price could be around $275 million, significantly higher than the $180 million Yardi Matrix placed on the property when McKesson picked up the remaining stake for $90 million in 2012.

The San Francisco Business Times reported McKesson would be occupying approximately 200,000 square feet of the building once it is sold, leaving the rest available for the new owner to lease to more tenants in a value-add play.

“This is an optimal time for McKesson to pursue the sale of One Post Street, as global investor and values for San Francisco office towers are at all-time highs,” Hielscher said. “The combination of McKesson’s long-term anchor tenancy and the ability to create value via strategic building improvements will be very desirable to a wide variety of investors.”

McKesson, which is involved in a company-wide program to improve its offices across the United States by following the WELL Building Standard, plans to invest in a two-year upgrade to its space at One Post St. The WELL Building Standard combines design and construction with evidence-based medical and scientific research to create an environment that supports health and wellness. Upgrades are expected to include increased natural light, open floor plans, more collaboration spaces and a variety of workspaces that will feature sit/stand desks and flexibility for future growth. The company has already upgraded its Richmond, Va., location and plans to target Dallas and Scottsdale, Ariz., in addition to San Francisco.

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